Tuesday, May 3, 2011

Quote of the day

Felix Salmon:
I’m evolving away from my preference for cap-and-trade over a carbon tax, since a cap-and-trade system is certain to get gamed by special interests.

Welcome to the club. FLG has written it before and will write it again -- the most efficient possible outcome under a cap-and-trade scheme, an efficient auction and very low trading costs for permits, is the same as a carbon tax. A straight up tax is far simpler to understand, more difficult to game, and directly affects price (P) rather than quantity (Q). So, the cost to the economy is more transparent as well.

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